Any product or service that is important to you, warrants some comparison to make sure you get the best deal. Payday lenders are no different. Before you apply with any payday lender, you need to compare all the options available to you to ensure you are getting the product and service that is best for you.
Why Should I Compare Payday Lenders?
Despite the strong presence of short term loan regulators, we still experience a lot of misleading statements and paid-to-rank priorities on many websites that compare payday lenders. It is therefore vital to compare lenders when considering taking a loan out. In this article, we discuss what you should consider before applying to a direct lender. We also discuss the key ways of identifying a good direct lender. These useful points will help you compare the best lenders for you.
Before you apply to any payday lender make sure that the reason that you are taking out a loan is justified. For example, it may be justified to take out a loan to buy a comfortable and safe family car. On the other hand, you can not justify taking a loan to buy a new Ferrari with turbo acceleration that makes a jet plane look like Noddy’s red and yellow car.
Note: Just like it’s important to compare lenders, we also recommend that you compare loans to help you find the loan option that best suits you.
Before applying with any payday lender, you should consider the following options:
- Family and Friends – It’s always best to request a loan from someone you know well – a good friend or a family member. That way, you can get an easy, interest-free loan. However, the involvement of friends and family with money issues could prove explosive. Often, it’s better to pay interest to a lender who is a stranger rather than jeopardize a close friendship or family relationship.
- The Bank – Without a doubt, this is one of the best options there is, but! To get a bank loan, you usually need to prove that you don’t need one. In other words, the fact that you need a loan can be a reason for the bank to deny you the request. Like Groucho Marx, the famous comedian once said: “I refuse to join any club that would have me as a member.”
- Credit Cards – Although a viable option, there is a very real risk of becoming addicted to credit, which has grave consequences on a person’s lifestyle. You also normally have to pay back interest on top of what you borrowed. A person can slip into deep financial trouble without realising they were doing anything wrong
- Non-Profit Organisations – Another, but more difficult solution, is to find a non-profit organization to give you a loan with a good rate. The problem with such institutions is that they are only happy to give loans when the purpose of the loan is relevant to the agenda that they are promoting.
Comparing lenders will get you the cheapest, safest and best loan product available for you!
How To Identify ‘Good’ Direct Lenders
There are all sorts of mathematical factors in this parameter. But, in simple terms, it means the following:
Suppose a consumer takes out a loan and does not repay the loan for one calendar year. This parameter is the percentage of the interest paid for the year, including all expenses. For example, suppose we took a loan of £100 from an institution giving a loan with a 20% APR. After a year, we will have a debt of £120, including all related costs. It does not matter if you call them ‘Credit Allocation Fees’ or ‘fee for the bank manager’s hair appointment’ – everything is included in it.
In most European countries, Britain in particular, the duty of the private banking institutions that provide loans is to publish its ‘Representative APR.’ This will be an average APR (for it is impossible to know if the person reading the publication is a good customer or a dangerous one). When it comes to loans, APR is the accepted parameter – it stands for ‘Annual Percentage Rate’.
Let’s discuss some ways to decide whether the direct lender under consideration is a good one you should do business with. How is it possible, in the digital world of today, to know who is on the other side of the screen? It turns out that even in the digital world, good companies have a ‘seal’ worth looking out for. All you need to do is check.
- Website looks professional and approachable.
- Full contact address including postcode.
- Check that the names of the people behind the company appear in the “About Us” page, including the CEO.
- Phone number that works.
- FCA license number
To help you identify a safe lender’s website, we have published a full infographic here.
How do you know you are dealing with a good lender?
Is customer information presented clearly? Is all the information easily available without having to dig for it throughout the site? A good sign is if they let you see all the loan terms (interest, fees, etc.) before you have to fill out a form and identify yourself. This shows that the company isn’t trying to ‘grab’ customers by force. It gives the customer the option to view, evaluate and decide for himself. Only if the customer decides to move forward do they fill out a form and continue the process.
Don’t be ashamed to call the company and speak to the service personnel on the other side. See their levels of courtesy, professionalism, patience and concern for the customer’s needs. Are they willing to explain how things work, and so on? Sometimes there’s nothing better than a conversation with actual people – even in today’s digital world.
Do they treat customers fairly? Perhaps first we should explain what we mean by ‘fair’: Well, transparency, transparency and again, transparency. All the information that the customer needs to know should be available. It should be obvious where the risks are, what you should and should not do and how the loan process works. Look for a general guide that you can download in advance. Companies that publish these guides show that they are taking care of their customers.
Transparency also means, that the lender provides a method to ‘play’ with the loan options, before submitting any application. One of the best available tools is an online loan calculator. A loan calculator is a tool that allows you to see the details of your loan precisely. Beginning with the full payment table (dates of the payments and the sum of each installment) and ending with the total cost of the loan. A loan calculator allows you to play with loan details enabling you to ensure that the loan you intend to take matches your needs. Loan calculators seem like a small detail, but it is an important one.
Check out whether the company has an orderly ‘complaints’ procedure. Is there anywhere or anyone to complain to, and how can you contact them.
Make sure to be very careful, as this industry’s standards are far from fair, such as those found on giants such as Amazon or eBay. Therefore, the recommendations should be taken with a grain of salt – to inform our opinion, not to determine it.
For more information on staying safe when borrowing online, check out our free online safety guide.
Tips for applying with a payday lender
When you apply with a payday lender, you want to do it in a way that will make it easier and faster for the lender to process your loan application, so that you get an answer quickly. More importantly, you want the lender to approve your loan.
Here are 6 tips (click the arrows to scroll) that will help you when applying for your loans online:
A final note on this topic: If there is anything that a company loves, it’s good customers coming back. If the lender has had a good experience with a particular customer, chances are they will give him a larger loan the second time round. Therefore, if you need another loan, you should always contact the lender you worked with in the past. Make sure to repay the loan on time to increase your chances of obtaining a larger loan than before, if necessary.
We hope that this article has been useful to you. You can find more articles on our website to help you find your way through the tangled world of finance. The articles dissect many important issues, all in simple and easy terms.